Taxpayers face a £2bn blow after Royal Bank of Scotland chief executive Stephen Hester stepped down.
Shares in the bank plunged amid a growing City backlash over the way Mr Hester’s departure was handled in an announcement rushed out following a board meeting yesterday after the stock exchange had closed.
They were down by nearly 7 per cent in early trading, far in excess of the 1 per cent fall in the other state owned bank Lloyds, as the bank’s independent investors ran for the exit.
A fall of that degree means the total value of all the taxpayer’s shares had fallen by nearly £2bn.
The taxpayer-backed lender confirmed plans for the loss of 2,000 investment banking jobs.
Yesterday Investec’s analyst Ian Gordon joined a growing chorus of criticism over the way the impending departure of Mr Hester was handled.
He said: “We see it as a matter of regret for all RBS’ stakeholders that the widely respected CEO Stephen Hester is to depart. Just one month ago chief financial officer Bruce van Saun’s move to Citizens was also announced.
“Despite a wholly unhelpful political and regulatory backdrop, Hester and van Saun have done an admirable job in terms of the ‘repair’ and restructuring of RBS.”
Mr Gordon described the handling of the move as “deeply unsatisfactory” and said that if the company had failed to establish a front runner to take over he regarded it as being “negligent” He also rounded on the Government for “repeatedly making a bad situation worse” at RBS.
Another broker described the situation as “unbelievable”. “I think I might submit my CV as I couldn't possibly do any worse,” they said.
David Buik, the veteran City commentator from Panmure also weighted in with a renewed attack on the Government saying Mr Hester had been “trussed up like a chicken and roasted”.
He added: “If anyone thinks that last night’s announcement had all the hallmarks of a mutual agreement between Stephen Hester and George Osborne that the RBS CEO should go at the end of the year – Dream on!
“Had that been the case a successor would have been named in the press release and the suggested process would have been plausible. It’s all speculation but may I venture to suggest that this parting of the ways has the Treasury’s dabs all over it!”
The situation now presents the Government with a serious credibility problem, and almost guarantees that a successor could name his price. But the salary will create a headache of its own given the public’s fury over the excessive rewards top bankers have enjoyed.
Richard Meddings, finance director at Standard Chartered, has already been mentioned by some as a potential “dream”. Gary Hoffman, who ran Northern Rock for the Government and is a former boss of Barclaycard, has also been suggested as a possible candidate. Nathan Bostock, the head of restructuring who is taking over as finance director, is seen as the leading internal candidate.
Ministers want privatisation to start in 2014 and the departure of Mr Hester was spun last night as the bank wanting to see “a new face” at the helm ahead of the start of the process.
Mr Hester said he would help to ensure an orderly transition and felt “loyalty” to the bank. But he described his departure as “a board decision, not mine”.